Economics

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Task One

Malaysia as we seen has undergone a lot of changes. During 1980's there isn't any much hypermarket and Jaya Jusco or now know as Jusco was one of the very first Hypermarket to be opened in Malaysia. As time flies by, Malaysia is now occupied by quite a number of other Hypermarkets like Tesco, Giant, Carrefour and Mydin. All this bring choices to the consumers in Malaysia as all these Hypermarkets are competing with each other. Retailing is one of the factors that bring growth to Malaysia Growth Domestic Product (GDP) and with more Hypermarkets coming up, so do the GDP of Malaysia.

The market structure of hypermarkets in Malaysia belongs to oligopoly. The market structure characteristics of oligopoly are quite alike to monopoly, but the difference is an oligopoly is a market dominated by small numbers of suppliers, which is called as oligopolist. The barrier to enter or exit in this market is high. The insufficient of cost to access of advanced technology, the copyright issues and restrictions by the government are the common difficulty to enter.

Market of oligopoly produces homogeneous and differentiated products. Homogeneous products are products that are the same including terms of branding. For instance, homogeneous products that can be found in any hypermarkets are like Nestle, Maggie, F&N and so much more. Differentiated products are products produced by the hypermarket itself, which uses its own branding.

Malaysia’s hypermarkets sell at a huge range of products for customers to choose on. Stationeries to home appliances, to clothing, skin cares and health products are widely available in these hypermarket. Customers nowadays prefer going to hypermarkets to get their daily fresh raw food then going to the morning wet market. Not only that, different hypermarket has its own branding products. For example Giant has first choice, Gino, Uncle Jack while Tesco has Tesco choice.

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Awareness of firms in price changes of competitors’ are very high as there are few sellers only. In order to gain more revenue, oligopolist uses non-price competition to compete with each other. Non-price competition includes the quality of services, giving out coupons or free gifts, advertisements or even longer operating hours. Firms find this more profitability than selling products at lower price.

Hypermarkets in Malaysia do promotion very frequently from time to time. They have promotions like deal of the week, electrical fair, anniversary deals and so much more. Other than that, they create price slash campaign, no plastic day on Saturdays and organize various buy-and-win contents to create awareness from customers. Moreover, firms offer their own privilege club card to customer as they purchase from them. The amount of purchases customer purchase will convert to reward point and these points are convertibly to cash vouchers or gifts redemptions.

The demand curve of an oligopolist is in kinked curve and its price decision making is when at the kink point. Each time when one firm increases the price, the rest of the competitors will not follow. This is mainly because even if a small increase in price, firm may lose many customers. Whereas when an oligopolist decreases the price, the other sellers will definitely follow. However, there will not be a big raise in customers because there might be a price war between competitors.

In order to increase a firm’s market share, the easiest way is to reduce the product cost to have greater sales. Competitors will definitely follow to the reduction of price if the products are similar. As firms compete with each other by reducing prices, consumers are the one who receive the benefits in the end. In attempt to abolish the competition entirely, some firms might even sell at loss.

For example, in refer to image (1); k is the price decision making point where at the price of $6, the quantity sold per day is 30. While in point h, the price had...
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